Market Update & Important Indicators
U.S. stocks rose Tuesday, buoyed by hopes for a deal between Greece and its international creditors. The Dow added 0.8% and the S&P 500 gained 1.1%. Tuesday's stock market move reversed Monday's losses, when stocks fell amid worries about Greece's debt negotiations with creditors. Coca-Cola shares rose 2.7%, leading the Dow higher, after the company reported fourth-quarter profit and revenue that topped analyst expectations. China added to overall market worries Tuesday as the world's second-largest economy posted its lowest inflation print since 2009, according to the country's statistics bureau. The consumer price index increased just 0.8% in January from a year earlier.
European stocks steadied on Tuesday after the previous session's declines, although the impending showdown between Greece and its creditors continued to weigh on sentiment. The Stoxx Europe 600 was 0.1% higher midmorning, after falling 0.7% on Monday. Spanish and Italian stocks gained after sharp falls on Monday, helped by a rebound in Greek markets. Greek markets settled after yet another sharp selloff on Monday. Government bonds gained, with two-year yields falling sharply, though at close to 20% they continue to indicate a high risk of default. The 10-year yield fell 0.5 percentage point to 10.5%. Yields fall as prices rise. Athens's main stock index was 2.3% higher.
Stocks in Japan slipped Tuesday, with investors worrying about a standoff between Greece and its creditors, but China shares gained after inflation there slipped to a five-year low. In Shanghai, stocks ended up 1.5% at 3141.59, after Chinese data showed consumer inflation in January rose 0.8% from a year earlier, below expectations, and slowing from a 1.5% year-over-year rise in December. Low inflation is expected to give the central bank more leeway for policy easing, often a boon for stocks.
LME metals all finished lower. Brent crude lost 2.1% to $57.1/bbl, while gold declined 0.5% to $1,233/oz.
Thought for the day
Under new management
During the last two years, significant senior management changes have occurred within the ASX metals and mining space. This is more pertinent to the gold/copper sector, where the depressed prices have resulted in more scrutiny from the investment community demanding a leaner structure, more transparency and accountability. A new ‘breed’ of managing directors / CEO has risen above the ranks, often younger and more ‘hungry’. Argonaut notes early encouraging signs and their positive contributions to their respective companies.
The following list features several new MD / CEOs of ASX gold producers appointed within the last two years.
Saracen
Raleigh Finlayson, appointed 2nd April 2013
Raleigh was a long time employee at Saracen and was subsequently promoted to the position of Managing Director. Under his management, Carosue Dam has simplified operations to a single open pit and an underground. The Company recently delivered record production and is in an enviable position both operationally and financially. The recently acquired Thunderbox provides scale, leverage and operational flexibility to SAR. The Company is undertaking one of the highest impact exploration programs to date, which could see a ‘game changer’ at Karari.
Troy
Martin Purvis, appointed 1st September 2014
Martin was appointed in September 2014, having previously worked for Sakari, Anglo American and Goldfields. Although a relatively short appointment, under his management, TRY has improved dilution and ground condition issue at Casposo. More importantly, TRY received all key permitting and secured the A$30m Investec Tranche II facility, removing market queries on project funding. The Company’s exploration strategy at Guyana has become more focused, with emphasis placed on near mine, shallow open pittable ounces. Reporting has also become more transparent, with production costs transitioned to an ‘all-in’ sustaining cost (co-product basis).
Perseus
Jeffery Quartermaine, appointed 1st February 2013
Jeffery was previously the CFO of PRU. During his management, PRU had successful negotiated with the Ghanaian government for the VAT refund which puts the Company in a financially enviable position ($57m cash, nil debt, hedgebook ~A$30m in-the-money). The Company has delivered significantly improved operational performance resulting from on site management changes, optimised mining parameters and better contract negotiations.
Kingsrose
Scott Huffadine, appointed 13th January, 2014
Scott is a career geologist with 20 years of experience, having worked with Metals X and Westgold. Under his management KRM received forestry approvals for the mining of the Talang Santo mine in July 2014, which is considered one of the more challenging for gold mines globally. Argonaut’s site visit in December 2014 confirmed a clean and compact operation at Talang Santo, although a slower than anticipated ramp up resulted from challenging ground conditions on mine’s the upper levels. The ‘hands on’ management team, including Scott and mining veteran Bill Phillips has built the mine cheaply. Scott has delivered a clear and visible path to Resource extensions at both Talang Santo, and the broader Way Linggo project area.
Red 5
Mark Williams, appointed 15th April, 2014
Mark, a Mining Engineer, had previously worked for Xstrata at Tampakin, Philippines. His experience in country, particularly in the field of community relations, is invaluable to RED. Despite the Philippines being perceived as a challenging jurisdiction in terms of permitting and operation, under his management, RED completed capitals works required to lift a Cease and Desist Order (CDO) ahead of schedule and below budget. This resulted in the recommencement of production at Siana in early CY15. Both the grade and more importantly the recoveries during recommissioning in January exceeded expectation.
OZ Minerals
Andrew Cole, appointed 5th September, 2014
Andrew, a Geophysicist, comes from a big company operational background, most recently COO of RIO’s Canadian Iron and Titanium business. He enters a business which was languishing from a lack of affirmative corporate decisions and at the end of a massive ~$1b cash outflow (incorporating a $390m capital return, $250m Carrapateena acquisition and a hefty cut-back on the Malu open pit). Andrew has put OZL under the microscope with a whole business review that will examine minority stakes (SFR, TOE), partnering on Carrapateena and acquisition strategies. As the business is entering another cash harvesting phase, the biggest challenge for Andrew will be how to allocate free cash flow. Return to shareholders, acquisitions and/or developing the high capital intensive Carrapateena are all considerations.
Independence Group
Peter Bradford, appointed 5th March, 2014
Peter, a Metallurgist, joined IGO at a time when the company was on the cusp of greatness, with Tropicana Gold ramp-up nearing completion. With project debt extinguished and cash on the rise, M&A strategy will be the focus of investors. So far the company has continued low cost junior farm-ins, but a sizable acquisition is within the financial capability of the company. With few significant targets within IGO’s historic Australian operating locus, Peter may guide the company to Africa, a jurisdiction he knows well, where better value assets are on offer.
In This Issue
Global Construction (GCS)
GCS has announced a $30m concrete and formwork contract for the new Perth Stadium. We believe the Company is well placed for growth on this project in addition to other work opportunities around Perth CBD.
Recent Contacts & Presentations
Northern Star (NST), Doray Minerals (DRM), Troy Resources (TRY), Gold Road Resources (GOR), Saracen Mineral Holdings Limited (SAR), Red 5 (RED), Resolute Mining Limited (RSG), RTG Mining (RTG), Otto Energy Limited (OEL), Peninsula Energy Limited (PEN), Sandfire Resources NL (SFR), Atrum Coal (ATU), Empired (EPD), DTI Group (DTI), Austal (ASB), TFS Corporation (TFC), Pioneer Credit (PNC), IMF Bentham (IMF), Sino Gas & Energy (SEH), Orbital Corporation (OEC)
Please read Argonaut's Important Disclaimers & disclosures
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